J. Crew Group, Inc. Announces Third Quarter Fiscal 2008 Results
Third Quarter Revenues Rise 9% to $363.1 million
Third Quarter Diluted EPS of $0.30
Revises Guidance for Fiscal 2008
NEW YORK, Nov. 25 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (third quarter) and nine months (first nine months) ended November 1, 2008.
Third Quarter highlights:
- Revenues increased 9% to $363.1 million. Store sales (Retail and Factory) increased 7% to $250.9 million, with comparable store sales decreasing 3%. Comparable store sales increased 5% in the third quarter of fiscal 2007. Direct sales (Internet and Phone) rose by 13% to $101.8 million. Direct sales increased 36% in the third quarter of fiscal 2007.
- Gross margin decreased to 41.6% of revenues from 45.6% of revenues in the third quarter of fiscal 2007.
- Operating income decreased 32% to $32.5 million, or 9.0% of revenues, compared to $47.7 million, or 14.3% of revenues, in the third quarter of fiscal 2007. Operating income in the third quarter of fiscal 2008 includes approximately $6 million of costs related to our Direct channel systems upgrades.
- Net income was $19.0 million, or $0.30 per diluted share, compared to a net income of $26.8 million, or $0.42 per diluted share, in the third quarter of fiscal 2007.
Millard Drexler, J. Crew's Chairman and CEO stated: "Despite these difficult economic times our priorities remain the same - providing innovative product, style and design, servicing our customers and making disciplined investments. At the same time, we recognize that a sea-change has occurred with the consumer. In the near term we are not immune to the significant challenges we are all facing in retail in these unprecedented times. However, our powerful brands, unique product offerings, compelling value proposition and multi-channel operating platform position us well for the long-term."
First Nine Months highlights:
- Revenues increased 11% to $1,039.9 million. Store sales (Retail and Factory) increased 10% to $722.3 million, with comparable store sales decreasing 0.4%. Comparable store sales increased 6% in the first nine months of fiscal 2007. Direct sales (Internet and Phone) rose by 14% to $285.9 million. Direct sales increased 29% in the first nine months of fiscal 2007.
- Gross margin decreased to 43.1% of revenues from 45.3% of revenues in the first nine months of fiscal 2007.
- Operating income decreased 9% to $117.1 million, or 11.3% of revenues, compared to $129.2 million, or 13.8% of revenues, in the first nine months of fiscal 2007.
- Net income was $67.7 million, or $1.06 per diluted share, compared to a net income of $72.1 million, or $1.13 per diluted share, in the first nine months of fiscal 2007.
Balance Sheet highlights as of November 1, 2008:
- Cash and cash equivalents were $114.4 million at the end of the third quarter and include the impact of income taxes paid of $52.8 million and voluntary principal payments of debt of $25.0 million during the last 12 months.
- Inventories at the end of the quarter were $250.1 million, reflecting the impact of 35 net stores opened since the third quarter of fiscal 2007 and 30 net stores opened since the end of fiscal 2007.
Based upon the macro economic environment and its continuing impact on the trend of our business, we are revising our guidance for fiscal 2008. For fiscal 2008, the Company currently expects diluted earnings per share in the range of $1.11 to $1.16 as compared to its previous range of $1.44 to $1.54 and fiscal 2007 diluted earnings per share of $1.52. The Company's revised expectations for the balance of fiscal 2008 include comparable store sales declining high single digits, Direct sales growth in the range of flat to mid single-digits and net square footage expansion of approximately 10%.
Conference Call Information
A conference call to discuss third quarter results is scheduled for today, November 25, 2008, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.jcrew.com. A replay of this call will be available until December 2, 2008 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 304166.
About J. Crew Group, Inc.
J. Crew Group, Inc. is a nationally recognized multi-channel retailer of women's and men's apparel, shoes and accessories. As of November 25, 2008, the Company operates 226 retail stores (including 5 crewcuts and 10 Madewell stores), the J. Crew catalog business, jcrew.com, and 74 factory outlet stores. Additionally, certain product, press release and SEC filing information concerning the Company are available at the Company's website www.jcrew.com.
Certain statements herein are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, changes in the overall level of consumer spending or preferences in apparel, our ability to compete with other retailers, the performance of the Company's products within the prevailing retail environment, our strategy and expansion plans, systems upgrades, reliance on key personnel, trade restrictions, political or financial instability in countries where the Company's goods are manufactured, postal rate increases, paper and printing costs, availability of suitable store locations at appropriate terms and other factors which are set forth in the Company's Form 10-K and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
J. Crew Group, Inc.
Condensed Consolidated Statements of Operations
(Amounts in thousands,
except percentages and
per share data) Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended November 1, November 3, November 1, November 3, 2008 2007 2008 2007 Net sales Stores $250,870 $233,588 $722,259 $654,182 Direct 101,812 90,315 285,958 251,424 352,682 323,903 1,008,217 905,606 Other 10,398 8,841 31,716 29,181 Total Revenues 363,080 332,744 1,039,933 934,787
Costs of goods sold,
buying and occupancy
costs 212,212 180,909 591,447 511,224 Gross Profit 150,868 151,835 448,486 423,563 As a percent of revenues 41.6% 45.6% 43.1% 45.3% Selling, general administrative expenses 118,321 104,150 331,360 294,385 As a percent of revenues 32.6% 31.3% 31.9% 31.5% Operating income 32,547 47,685 117,126 129,178 As a percent of revenues 9.0% 14.3% 11.3% 13.8%
Interest expense, net 570 3,077 4,370 9,377
Income before income
taxes 31,977 44,608 112,756 119,801
Provision for income
taxes 12,936 17,771 45,091 47,683 Net income $19,041 $26,837 $67,665 $72,118 Income per share: Basic $0.31 $0.44 $1.10 $1.20 Diluted $0.30 $0.42 $1.06 $1.13
Weighted average shares
outstanding: Basic 61,878 60,725 61,588 60,257 Diluted 64,078 64,195 64,127 63,923 Exhibit (2) J. Crew Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) (In thousands) November 1, February 2, November 3, 2008 2008 2007 Assets Current assets: Cash and cash equivalents $114,456 $131,510 $63,760 Inventories 250,140 158,525 210,774 Prepaid expenses and other current assets 36,240 33,293 42,121 Prepaid income taxes 6,918 1,194 -
Refundable income taxes - 8,600 8,600
Total current assets 407,754 333,122 325,255 Property and equipment, net 198,032 168,292 156,524 Other assets 31,302 34,182 29,941 Total assets $637,088 $535,596 $511,720
Liabilities and Stockholders'
equity Current liabilities: Accounts payable $134,576 $101,277 $106,811 Other current liabilities 84,415 93,796 80,310 Income taxes payable - - 13,401 Total current liabilities 218,991 195,073 200,522 Long-term debt 100,000 125,000 125,000 Deferred credits 74,378 67,600 69,140 Other liabilities 7,654 7,601 6,689 Stockholders' equity 236,065 140,322 110,369 Total liabilities and stockholders' equity $637,088 $535,596 $511,720
Actual and Projected Store Count and Square Footage
Fiscal 2008 Quarter Total stores Number of Number of stores Total stores open at stores opened closed during open at end beginning during the quarter of the of the the quarter quarter quarter 1st Quarter (Actual) 260 7 0 267 2nd Quarter (Actual) 267 9 0 276 3rd Quarter (Actual) 276 15 1 290 4th Quarter (Projected) 290 11 1 300 Fiscal 2008 Quarter Total gross Gross square feet Reduction of Total gross square feet for stores opened gross square square feet at beginning or expanded feet for at end of of the during the stores closed the quarter quarter quarter or downsized during the quarter 1st Quarter (Actual) 1,688,016 38,685 (2,261) 1,724,440 2nd Quarter (Actual) 1,724,440 41,949 (7,899) 1,758,490 3rd Quarter (Actual) 1,758,490 67,657 (10,304) 1,815,843 4th Quarter (Projected) 1,815,843 54,547 (6,181) 1,864,209
SOURCE J. Crew Group, Inc.
CONTACT: James S. Scully, Chief Administrative Officer and Chief
Financial Officer of J. Crew Group, Inc., +1-212-209-8040, or Investors,
Allison Malkin, Chad Jacobs, or Joe Teklits, all of Integrated Corporate
Relations, +1-203-682-8200, for J. Crew Group, Inc.
Web Site: http://www.jcrew.com